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Germany's Jobs Mirage

East hit hard as nation bears worst unemployment since '30s

The paintings in the city's Hall of Peace in Zeitz hint at a poignant story.

Each of several spandrels along the vaulted ceiling celebrates a different sector of the prosperous economy in turn-of-the-century Zeitz: There's a farmer, a miner, an iron smelter, a cabinetmaker, a dyer.

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Now, less than a century later, these occupations have been reduced to shadows of their former selves. Forty years of a command economy in the former East Germany turned a number of world-class industries into charity cases.

Protected for decades from the rigors of market discipline, many of these businesses couldn't survive the return to free competition at the end of the cold war. In many cases, their most abundant "product" in recent years has been laid-off employees.

Not that German reunification hasn't brought money. Funds pour in from the federal government as well as private investors. But new investment no longer means lots of new jobs.

At a recent public meeting in the Hall of Peace, an official showed off a list of outside investments that have come to Zeitz and the surrounding region, each of them more than 100 million marks ($60 million). And yet, he acknowledged, "There's been a stream of billions into this area, and still the unemployment problem remains unchanged."

The official unemployment rate in Zeitz, which has 37,000 inhabitants, is 27 percent. "We hope it doesn't reach 30 percent," says Dieter Kmietczyk, mayor of Zeitz. To get at hidden unemployment covered by people who are being further trained or retrained, or who are in make-work programs or part-time work, "you have to multiply by a factor of two," he adds grimly.

The situation in Zeitz is but an extreme example of the situation throughout eastern Germany. The country as a whole remains in the grip of the most severe unemployment since the 1930s, with nearly 4.5 million jobless. Almost half a million jobs have disappeared since last September, according to the Federal Labor Institute in Nuremberg.

Little faith in government

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Yesterday, German Chancellor Helmut Kohl's Christian Democratic Union approved its 1998 reelection platform, which focuses on job creation. The party calls for more part-time jobs, more flexibility in working hours, more temporary jobs, and modest wage increases to boost employment.

Throughout the long-running crisis in Zeitz, there has been no lack of job-creation initiatives and calls for government, business, and labor to work together, as they already do. Zeitz has an employment plan, supposed to be a model project for the European Union, which is helping finance it. But clear-cut results are yet to be seen.

Frustration here simmers just below the surface. At the public meeting, one participant burst out, "I was hoping we'd get more discussion ... that you'd be able to tell us what we're doing wrong here." And a teenager, reflecting widespread public opinion, dismissed politicians as "too dumb to come up with good ideas" for solving the crisis.

Even the economic successes of the region can ring hollow: New, or newly modernized manufacturing plants simply don't produce that many jobs, even if they pay well. The Italian company Radici, star tenant in a special industrial park being developed for the chemical industry on the site of an old refinery outside Zeitz, is investing $180 million, but will employ just 140 people.

Another problem for the Zeitz region is high costs. Franz Drewes, a consultant to the business community here, says, "A lot of west German investors, or European investors, say, 'If we want to invest, we'll go 200 or 300 km to the east, to Poland or the Czech Republic,' " where costs are lower.

In 1990, Karsdorfer Cement, a former state-owned enterprise, was taken over and modernized by Lafarge, a French company that is one of the world's leading producers of cement and concrete. But the business was unable to capitalize on its advantage during the road-building boom of the early 1990s: Cement imports into eastern Germany nearly doubled. Cheaper imports from Poland, explains Dieter Hartung, technical director at Karsdorfer.

For many here, the way out of chronic unemployment is through service industries. Elfgard Boy, managing partner at the Future Professional Development Institute in nearby Halle, sounds optimistic. "The situation doesn't look that grim to me," she says. Dr. Boy runs seminars for people who want to set up a business. "We've had 200 entrepreneurs go through our programs and start businesses, with an average of two jobs at each one. We do a weekend course - Saturday, Sunday, and Monday evening - that's very popular."

Jrg Stolper, deputy mayor of Zeitz, says, "It's very hard for our people to think in terms of small firms. They see the solutions in the direction of large firms."

Small businesses succeed

Klaus Brehme, owner of Brehme Services, an industrial cleaning firm, provides evidence that the service industry can be taken seriously. A woodworker who wanted to be his own boss even during the Communist period, he started in 1987 as a one-man operation. Now he has 300 employees and offices throughout eastern Germany. They are not high-wage jobs, but he is proud that 94 percent of his staff are covered by social insurance.

"The very people that laughed at me - the city officials that granted me my business license - were the first ones to hire me," he says with the satisfaction of one who laughs last.

Elke Starke is another Zeitzer who took the plunge to independence, albeit on a smaller scale. She was just starting out as a pharmacist in Baden-Wrttemberg, in west Germany, when the opportunity to buy her own pharmacy in Zeitz arose. The prospect of trading a salaried position for being her own boss was daunting, but she comes from an entrepreneurial family: Both sets of grandparents had been shopkeepers.

"I got very good financial advice at home in the Black Forest; they helped me figure how much turnover I would need on my own to equal the standard of living I had as an employee. And the workmen here did a great job," she says of the construction workers who helped her renovate the building where she works and lives. Tax breaks and other government incentives helped her, too.

"More people should just do it," she says.

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